As filed with the Securities and Exchange Commission on January 29, 2001
Registration No. 333-48800
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
Amendment No. 2 to
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
BioMarin Pharmaceutical Inc.
(Exact name of registrant as specified in its charter)
Delaware 68-0397820
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
371 Bel Marin Keys Boulevard, Suite 210
Novato, California 94949
(415) 884-6700
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
-------------------------------------------------
Raymond W. Anderson
Chief Financial Officer
BioMarin Pharmaceutical Inc.
371 Bel Marin Keys Boulevard, Suite 210
Novato, California 94949
(415) 884-6700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-------------------------------------------------
Copy to:
Siobhan McBreen Burke
Paul, Hastings, Janofsky & Walker LLP
555 South Flower Street, 23rd Floor
Los Angeles, California 90071-2371
(213) 683-6000
Approximate date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check thefollowing box. |X|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
================================================================================
PROSPECTUS
4,000,000 Shares
BioMarin Pharmaceutical Inc.
Common Stock
---------------------
This prospectus will allow us to issue up to 4,000,000 shares of our common
stock over time. On January 26, 2001, we entered into a common stock purchase
agreement with Acqua Wellington North American Equities Fund, Ltd. pursuant to
which, we may sell them shares of our common stock from time to time as
described in the "Plan of Distribution."
o We will provide a prospectus supplement each time we issue shares of our
common stock;
o The prospectus supplement will inform you about the specific terms of the
offering and also may add, update or change information contained in this
document; and
o You should read this document and any prospectus supplement carefully
before you invest.
Our common stock currently trades on the Nasdaq National Market and the
Swiss SWX New Market under the symbol "BMRN."
See "Risk Factors" beginning on page 3 to read about risks that you should
consider before buying shares of our common stock.
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved these securities or passed upon the adequacy or
accuracy of this prospectus. Any representation to the contrary is a criminal
offense.
The date of this prospectus is January 29, 2001
TABLE OF CONTENTS
Summary........................................................................1
The Offering...................................................................2
Risk Factors...................................................................3
Forward Looking Statements....................................................14
Material Changes to Our Company...............................................15
Use of Proceeds...............................................................16
Plan of Distribution..........................................................17
Legal Matters.................................................................18
Experts .....................................................................18
WHERE YOU CAN FIND MORE INFORMATION
We are a reporting company and file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy these reports, proxy statements and other information at the SEC's public
reference rooms in Washington, D.C., New York, NY and Chicago, IL. You can
request copies of these documents by writing to the SEC and paying a fee for the
copying cost. Please call the SEC at 1-800-SEC-0330 for more information about
the operation of the public reference rooms. Our SEC filings are also available
at the SEC's Web site at "http://www.sec.gov." In addition, you can read and
copy our SEC filings at the office of the National Association of Securities
Dealers, Inc. at 1735 K Street, Washington, D.C. 20006.
The SEC allows us to "incorporate by reference" information that we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. Further, all
filings we make under the Securities Exchange Act of 1934 after the date of the
initial registration statement and prior to effectiveness of the registration
statement shall be deemed to be incorporated by reference into this prospectus.
We incorporate by reference the documents listed below and any future filings we
will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934:
1. Our Annual Report on Form 10-K for the year ended December 31, 1999;
2. Our Definitive Proxy Statement dated April 20, 2000 filed in connection
with our 2000 Annual Meeting of Stockholders;
3. Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2000,
June 30, 2000 and September 30, 2000;
4. Our current report on Form 8-K as filed on November 7, 2000; and
5. The description of our common stock set forth in our Amendment No. 4
Registration Statement on Form S-1, filed with the SEC on July 22, 1999
We will provide to you at no cost a copy of any and all of the information
incorporated by reference into the registration statement of which this
prospectus is a part. You may make a request for copies of this information in
writing or by telephone. Requests should be directed to:
BioMarin Pharmaceutical Inc.
Attention: Investor Relations
371 Bel Marin Keys Boulevard, Suite 210
Novato, CA 94949
(415) 884-6700
SUMMARY
This prospectus contains forward looking statements which involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward looking statements as a result of certain factors appearing
under "Risk Factors" and elsewhere in this prospectus.
The following summary does not contain all the information that may be
important to you. You should read the entire Prospectus, including the financial
statements and other information incorporated by reference in this prospectus,
before making an investment decision.
BioMarin Pharmaceutical Inc. (BioMarin) is a developer of carbohydrate
enzyme therapies for debilitating, life-threatening, chronic genetic disorders
and other diseases and conditions. In April 1999, we completed a twelve-month
patient evaluation for the initial clinical trial of our lead drug product,
Aldurazyme(TM), for the treatment of mucopolysaccharidosis-I or MPS-I, a serious
genetic disorder. The results were presented at the American Society for Human
Genetics in October 1999. We continue to collect data from the ongoing treatment
of these original patients. In September 1998, we established a joint venture
with Genzyme for the worldwide development and commercialization of Aldurazyme.
Aldurazyme has received fast track designation for the treatment of the more
severe forms of MPS-I. The U.S. Food and Drug Administration (FDA) has granted
Aldurazyme an orphan drug designation giving us exclusive rights to market
Aldurazyme to treat MPS-I for seven years from the date of FDA approval if
Aldurazyme is the first product to be approved by the FDA for the treatment of
MPS-I.
MPS-I is a life-threatening genetic disorder caused by the lack of a
sufficient quantity of the enzyme (alpha)-L-iduronidase, which affects about
3,400 patients in developed countries, including approximately 1,000 in the
United States and Canada. Patients with MPS-I have multiple debilitating
symptoms resulting from the buildup of carbohydrate residues in all tissues in
the body. These symptoms include delayed physical and mental growth, enlarged
livers and spleens, skeletal and joint deformities, airway obstruction, heart
disease, reduced endurance and pulmonary function, and impaired hearing and
vision. Most children with MPS-I will die from complications associated with the
disease before adulthood.
Aldurazyme is a specific form of recombinant human (alpha)-L-iduronidase
that replaces a genetic deficiency of (alpha)-L-iduronidase in MPS-I patients.
The initial clinical trial treated ten patients with MPS-I at five medical
centers in the United States. Based on data collected during the initial
twelve-month evaluation period, Aldurazyme met the primary endpoints set forth
in the investigational new drug application. In addition, Aldurazyme
demonstrated efficacy according to various secondary endpoints in each of the
patients. In collaboration with Genzyme, we plan to initiate a Phase III
Confirmatory Clinical Trial of Aldurazyme in the fourth quarter of 2000 with the
intention to file a Biologics License Application (BLA) with the FDA late in
2001, pending the successful outcome of the Phase III Confirmatory Trial.
In August 2000, our Galli Drive manufacturing facility and a smaller
clinical manufacturing laboratory in our Bel Marin Keys Boulevard facility were
both subjected to an extensive inspection by the State of California Food and
Drug Branch and were granted licenses to produce clinical product.
We have submitted an Investigational New Drug Application for recombinant
human N-acetylgalactosamine-4-sulfatase also known as arylsulfatase B or rhASB
(formerly referred to as BM102) and received FDA acceptance to begin a Phase
I/II clinical trial in enzyme replacement therapy for MPS-VI, which was
initiated on October 11, 2000. MPS-VI, also known as Maroteaux-Lamy syndrome, is
similar in its clinical symptoms to MPS-I. However, MPS-VI does not appear to
have the central nervous system involvement and mental retardation
characteristics of the most severe form of MPS-I. We are manufacturing clinical
bulk rhASB in the Bel Marin Keys Boulevard facility. RhASB has received fast
track and orphan drug designations by the FDA.
We have successfully conducted preclinical studies of our burn enzyme,
Vibriolysin (formerly referred to as BM202), for use in burn debridement and
grafting in pigs and mice. We expect to submit an application to the FDA or a
foreign equivalent to begin a clinical trial for Vibriolysin by mid-year 2001.
Our principal executive offices are located at 371 Bel Marin Keys
Boulevard, Suite 210, Novato, CA 94949 and our telephone number is (415)
884-6700.
1
THE OFFERING
Common stock offered in this prospectus...... 4,000,000 shares
Common stock outstanding after the offering.. 40,921,966 shares
Use of proceeds.............................. For operating costs, capital
expenditures and working capital
needs, including costs associated
with the regulatory approval,
manufacturing, and potential
commercialization of Aldurazyme;
for our research and development
activities related to our pipeline
products including recombinant
human arylsulfatase B (rhASB) and
Vibriolysin; and other general
corporate purposes. We will
receive proceeds from the sale of
the shares to Acqua Wellington as
described in the Plan of
Distribution but we will receive
no proceeds from any subsequent
sale of the shares by Acqua
Wellington. See "Use of
Proceeds."
Nasdaq National Market and
SWX New Market symbol....................... BMRN
The number of shares of common stock outstanding after this offering is
based on the number of shares outstanding as of December 31, 2000 and assumes
that we have issued all of the shares of our common stock offered in this
prospectus, but excludes:
o 5,103,073 shares subject to options outstanding as of December 31, 2000, at
a weighted average exercise price of $10.70 per share;
o 1,649,846 additional shares that we could issue under our stock option
plans; and
o 421,569 additional shares that we could issue under our employee stock
purchase plan.
2
RISK FACTORS
An investment in our common stock involves a high degree of risk. We
operate in a dynamic and rapidly changing industry that involves numerous risks
and uncertainties. Before purchasing these securities, you should carefully
consider the following risk factors, as well as other information contained in
this prospectus or incorporated by reference into this prospectus, in evaluating
an investment in the securities offered by this prospectus. The risks and
uncertainties described below are not the only ones we face. Other risks and
uncertainties, including those that we do not currently consider material, may
impair our business. If any of the risks discussed below actually occur, our
business, financial condition, operating results or cash flows could be
materially adversely affected. This could cause the trading price of our common
stock to decline, and you may lose all or part of your investment.
If we continue to incur operating losses for a period longer than anticipated,
we may be unable to continue our operations at planned levels and be forced to
reduce or discontinue operations.
We are in an early stage of development and have operated at a net loss
since we were formed. Since we began operations in March 1997, we have been
engaged primarily in research and development. We have no sales revenues from
any of our drug products. As of September 30, 2000, we had an accumulated
deficit of approximately $70.1 million. We expect to continue to operate at a
net loss at least through 2002. Our future profitability depends on our
receiving regulatory approval of our drug candidates and our ability to
successfully manufacture and market any approved drugs, either by ourselves or
jointly with others. The extent of our future losses and the timing of
profitability are highly uncertain. If we fail to become profitable or are
unable to sustain profitability on a continuing basis, then we may be unable to
continue our operations.
Because of the relative small size and scale of our wholly-owned
subsidiary, Glyko, Inc., profits from its products and services will be
insufficient to offset the expenses associated with our pharmaceutical business.
As a result, we expect that operating losses will continue and increase for the
foreseeable future.
If we fail to obtain the capital necessary to fund our operations, we will be
unable to complete our product development programs.
In the future, we may need to raise substantial additional capital to fund
operations. We cannot be certain that any financing will be available when
needed. If we fail to raise additional financing as we need it, we will have to
delay or terminate some or all of our product development programs.
We expect to continue to spend substantial amounts of capital for our
operations for the foreseeable future. Activities which will require additional
expenditures include:
o Research and development programs
o Preclinical studies and clinical trials
o Process development, including quality systems for product manufacture
o Regulatory processes in the United States and international jurisdictions
o Commercial scale manufacturing capabilities
o Expansion of sales and marketing activities
The amount of capital we will need depends on many factors, including:
o The progress, timing and scope of our research and development programs
o The progress, timing and scope of our preclinical studies and clinical
trials
o The time and cost necessary to obtain regulatory approvals
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o The time and cost necessary to develop commercial processes, including
quality systems
o The time and cost necessary to build our manufacturing facilities and
obtain the necessary regulatory approvals for those facilities
o The time and cost necessary to respond to technological and market
developments
o Any changes made or new developments in our existing collaborative,
licensing and other commercial relationships
o Any new collaborative, licensing and other commercial relationships that we
may establish
Moreover, our fixed expenses such as rent, license payments and other
contractual commitments are substantial and will increase in the future. These
fixed expenses will increase because we may enter into:
o Additional leases for new facilities and capital equipment
o Additional licenses and collaborative agreements
o Additional contracts for consulting, maintenance and administrative
services
o Additional contracts for product manufacturing
We believe that the cash, cash equivalents and short-term investment
securities balances at September 30, 2000 will be sufficient to meet our
operating and capital requirements through mid-year 2001. This estimate is based
on assumptions and estimates, which may prove to be wrong. As a result, we may
need or choose to obtain additional financing during that time.
If we fail to obtain regulatory approval to commercially manufacture or sell any
of our future drug products, or if approval is delayed, we will be unable to
generate revenue from the sale of our products.
We must obtain regulatory approval to market our products in the U.S. and
foreign jurisdictions.
We must obtain regulatory approval before marketing or selling our drug
products. In the United States, we must obtain FDA approval for each drug that
we intend to commercialize. The FDA approval process is typically lengthy and
expensive, and approval is never certain. Products distributed abroad are also
subject to foreign government regulation. None of our drug products has received
regulatory approval to be commercially marketed and sold. If we fail to obtain
regulatory approval, we will be unable to market and sell our drug products.
Because of the risks and uncertainties in biopharmaceutical development, our
drug candidates could take a significantly longer time to gain regulatory
approval than we expect or may never gain approval. If regulatory approval is
delayed, our management's credibility, the value of our Company and our
operating results will be adversely affected.
To obtain regulatory approval to market our products, preclinical studies and
costly and lengthy clinical trials may be required and the results of the
studies and trials are highly uncertain.
As part of the FDA approval process, we must conduct, at our own expense,
preclinical studies in the laboratory on animals, and clinical trials on humans
for each drug candidate. We expect the number of preclinical studies and
clinical trials that the FDA will require will vary depending on the drug
product, the disease or condition the drug is being developed to address and
regulations applicable to the particular drug. We may need to perform multiple
preclinical studies using various doses and formulations before we can begin
clinical trials, which could result in delays in our ability to market any of
our drug products. Furthermore, even if we obtain favorable results in
preclinical studies on animals, the results in humans may be significantly
different.
After we have conducted preclinical studies in animals, we must demonstrate
that our drug products are safe and efficacious for use on the target human
patients in order to receive regulatory approval for commercial sale. Adverse or
inconclusive clinical results would stop us from filing for regulatory approval
of our products. Additional factors that can cause delay or termination of our
clinical trials include:
4
o Slow patient enrollment
o Longer treatment time required to demonstrate efficacy
o Lack of sufficient supplies of the drug candidate
o Adverse medical events or side effects in treated patients
o Lack of effectiveness of the drug candidate being tested
o Regulatory requests for additional clinical trials
Typically, if a drug product is intended to treat a chronic disease, safety
and efficacy data must be gathered over an extended period of time, which can
range from six months to three years or more. In addition, clinical trials on
humans are typically conducted in three phases. The FDA generally requires two
pivotal clinical trials that demonstrate substantial evidence of safety and
efficacy and appropriate dosing in a broad patient population at multiple sites
to support an application for regulatory approval. If a drug is intended for the
treatment of a serious or life-threatening condition and the drug demonstrates
the potential to address unmet medical needs for this condition, fewer clinical
trials may be sufficient to prove safety and efficacy under the FDA's
Modernization Act of 1997.
In April 1999, we completed a twelve-month patient evaluation for the
initial clinical trial of our lead drug product, Aldurazyme, for the treatment
of MPS-I. The results were presented at the American Society for Human Genetics
in October 1999. We continue to collect data from the ongoing treatment of these
original patients. The initial clinical trial treated ten patients with MPS-I at
five medical centers in the United States. Two of the original ten
patients enrolled in the first clinical trial of Aldurazyme died in 2000. Based
on medical data collected from clinical investigative sites, neither case
directly implicated treatment with Aldurazyme as the cause of death. The data
suggest that one patient died due to a combination of systemic viral illness,
residual MPS I coronary disease, and external factors. This patient had received
103 weeks of Aldurazyme administration. For the other patient, the data suggest
that the patient died due to complications following posterior spinal fusion for
scoliosis. This patient had received 127 weeks of Aldurazyme administration. The
fast track designation for Aldurazyme may not actually lead to a faster review
process.
Although Aldurazyme has obtained a fast track designation, we cannot
guarantee a faster review process or faster approval compared to the normal FDA
procedures.
We will not be able to sell our products if we fail to comply with manufacturing
regulations.
Before we can begin commercial manufacture of our products, we must obtain
regulatory approval of our manufacturing facility and process. In addition,
manufacture of our drug products must comply with the FDA's current Good
Manufacturing Practices regulations, commonly known as cGMP. The cGMP
regulations govern quality control and documentation policies and procedures.
Our manufacturing facilities are continuously subject to inspection by the FDA,
the State of California and foreign regulatory authorities, before and after
product approval. Our Galli Drive and our Bel Marin Keys Boulevard manufacturing
facilities have been inspected and licensed by the State of California for
clinical pharmaceutical manufacture. We cannot guarantee that these facilities
will pass federal or international regulatory inspection. We cannot guarantee
that we, or any potential third-party manufacturer of our drug products, will be
able to comply with cGMP regulations.
We must pass Federal, state and European regulatory inspections, and we
must manufacture three process qualification batches (five process qualification
batches for Europe) to final specifications under cGMP controls before the
Aldurazyme BLA can be approved. We cannot ensure that we will manufacture the
process qualification batches or pass the inspections in a timely manner, if at
all.
If we fail to obtain orphan drug exclusivity for our products, our competitors
may sell products to treat the same conditions and our revenues may be reduced.
As part of our business strategy, we intend to develop drugs that may be
eligible for FDA orphan drug designation. Under the Orphan Drug Act, the FDA may
designate a product as an orphan drug if it is a drug intended to treat a rare
disease or condition, defined as a patient population of less than 200,000 in
5
the United States. The company that obtains the first FDA approval for a
designated orphan drug for a given rare disease receives marketing exclusivity
for use of that drug for the stated condition for a period of seven years.
However, different drugs can be approved for the same condition. Similar
regulations are available in the European Union with a ten-year period of market
exclusivity.
Because the extent and scope of patent protection for our drug products is
limited, orphan drug designation is particularly important for our products that
are eligible for orphan drug designation. We plan to rely on the exclusivity
period under the orphan drug designation to maintain a competitive position. If
we do not obtain orphan drug exclusivity for our drug products which do not have
patent protection, our competitors may then sell the same drug to treat the same
condition.
We received orphan drug designation from the FDA for Aldurazyme in
September 1997. In February 1999, we received orphan drug designation from the
FDA for rhASB for the treatment of MPS-VI. Even though we have obtained orphan
drug designation for these drugs and even if we obtain orphan drug designation
for other products we develop, we cannot guarantee that we will be the first to
obtain marketing approval for any orphan indication or that exclusivity would
effectively protect the product from competition. Orphan drug designation
neither shortens the development time or FDA review time of a drug so designated
nor gives the drug any advantage in the FDA review or approval process.
Because the target patient populations for our products are small we must
achieve significant market share and obtain high per patient prices for our
products to achieve profitability.
Our initial drug candidates target disorders with small patient
populations. As a result, our per patient prices must be high enough to recover
our development costs and achieve profitability. For example, two of our initial
drug products in genetic disorders, Aldurazyme and rhASB, target patients with
MPS-I and MPS-VI, respectively. We estimate that there are approximately 3,400
patients with MPS-I and 1,100 patients with MPS-VI in the developed world. We
believe that we will need to market worldwide to achieve significant market
share. In addition, we are developing other drug candidates to treat conditions,
such as other genetic diseases and serious burn wounds, with small patient
populations. We cannot be certain that we will be able to obtain sufficient
market share for our drug products at a price high enough to justify our product
development efforts.
If we fail to obtain an adequate level of reimbursement for our drug products by
third-party payors, there would be no commercially viable markets for our
products.
The course of treatment for patients with MPS-I using Aldurazyme is
expected to be expensive. We expect patients to need treatment throughout their
lifetimes. We expect that most families of patients will not be capable of
paying for this treatment themselves. There will be no commercially viable
market for Aldurazyme without reimbursement from third-party payors.
Third-party payors, such as government or private health care insurers,
carefully review and increasingly challenge the price charged for drugs.
Reimbursement rates from private companies vary depending on the third-party
payor, the insurance plan and other factors. Reimbursement systems in
international markets vary significantly by country and by region, and
reimbursement approvals must be obtained on a country-by-country basis. We
cannot be certain that third-party payors will pay for the costs of our drugs
and the courses of treatment. Even if we are able to obtain reimbursement from
third-party payors, we cannot be certain that reimbursement rates will be enough
to allow us to profit from sales of our drugs or to justify our product
development expenses.
We currently have no expertise obtaining reimbursement. We expect to rely
on the expertise of our joint venture partner Genzyme to obtain reimbursement
for the costs of Aldurazyme. We cannot predict what the reimbursement rates will
be. In addition, we will need to develop our own reimbursement expertise for
future drug candidates unless we enter into collaborations with other companies
with the necessary expertise.
We expect that in the future, reimbursement will be increasingly restricted
both in the United States and internationally. The escalating cost of health
care has led to increased pressure on the health care industry to reduce costs.
Governmental and private third-party payors have proposed health care reforms
and cost reductions. A number of federal and state proposals to control the cost
of health care, including the cost of drug treatments have been made in the
United States. In some foreign markets, the government controls the pricing
which would affect the profitability of drugs. Current government regulations
6
and possible future legislation regarding health care may affect our future
revenues from sales of our drugs and may adversely affect our business and
prospects.
If we are unable to protect our proprietary technology, we may not be able to
compete as effectively.
Where appropriate, we seek patent protection for certain aspects of our
technology. Meaningful patent protection may not be available for some of the
enzymes we are developing, including Aldurazyme and rhASB. If we must spend
significant time and money protecting our patents, designing around patents held
by others or licensing, for large fees, patents or other proprietary rights held
by others, our business and financial prospects may be harmed.
The patent positions of biotechnology products are complex and uncertain.
The scope and extent of patent protection for some of our products are
particularly uncertain because key information on some of the enzymes we are
developing has existed in the public domain for many years. Other parties have
published the structure of the enzymes, the methods for purifying or producing
the enzymes or the methods of treatment. The composition and genetic sequences
of animal and/or human versions of many of our enzymes, including those for
Aldurazyme and rhASB, have been published and are believed to be in the public
domain. The composition and genetic sequences of other MPS enzymes which we
intend to develop as products have also been published. Publication of this
information may prevent us from obtaining composition-of-matter patents, which
are generally believed to offer the strongest patent protection. For enzymes
with no prospect of composition-of-matter patents, we will depend on orphan drug
status to provide us a competitive advantage.
In addition, our owned and licensed patents and patent applications do not
ensure the protection of our intellectual property for a number of other
reasons:
o We do not know whether our patent applications will result in actual
patents. For example, we may not have developed a method for treating
a disease before others developed similar methods. o Competitors may
interfere with our patent process in a variety of ways. Competitors
may claim that they invented the claimed invention prior to us.
Competitors may also claim that we are infringing on their patents and
therefore cannot practice our technology as claimed under our patent.
Competitors may also contest our patents by showing the patent
examiner that the invention was not original, was not novel or was
obvious. As a Company, we have no meaningful experience with
competitors interfering with our patents or patent applications.
o Enforcing patents is expensive and may absorb significant time of our
management. In litigation, a competitor could claim that our issued
patents are not valid for a number of reasons. If the court agrees, we
would lose that patent.
o Even if we receive a patent, it may not provide much practical
protection. If we receive a patent with a narrow scope, then it will
be easier for competitors to design products that do not infringe on
our patent.
In addition, competitors also seek patent protection for their technology.
There are many patents in our field of technology, and we cannot guarantee that
we do not infringe on those patents or that we will not infringe on patents
granted in the future. If a patent holder believes our product infringes on
their patent, the patent holder may sue us even if we have received patent
protection for our technology. If someone else claims we infringe on their
technology, we would face a number of issues, including:
o Defending a lawsuit takes significant time and can be very expensive.
o If the court decides that our product infringes on the competitor's
patent, we may have to pay substantial damages for past infringement.
o The court may prohibit us from selling or licensing the product unless
the patent holder licenses the patent to us. The patent holder is not
required to grant us a license. If a license is available, we may have
to pay substantial royalties or grant cross-licenses to our patents.
o Redesigning our product so it does not infringe may not be possible or
could require substantial funds and time.
7
It is also unclear whether our trade secrets will provide useful
protection. While we use reasonable efforts to protect our trade secrets, our
employees or consultants may unintentionally or willfully disclose our
information to competitors. Enforcing a claim that someone else illegally
obtained and is using our trade secrets, like patent litigation, is expensive
and time consuming, and the outcome is unpredictable. In addition, courts
outside the United States are sometimes less willing to protect trade secrets.
Our competitors may independently develop equivalent knowledge, methods and
know-how.
We may also support and collaborate in research conducted by government
organizations or by universities. We cannot guarantee that we will be able to
acquire any exclusive rights to technology or products derived from these
collaborations. If we do not obtain required licenses or rights, we could
encounter delays in product development while we attempt to design around other
patents or even be prohibited from developing, manufacturing or selling products
requiring these licenses. There is also a risk that disputes may arise as to the
rights to technology or products developed in collaboration with other parties.
The United States Patent and Trademark Office recently issued a patent which
related to (alpha)-L-iduronidase. If Aldurazyme infringes on this patent and we
are not able to successfully challenge it, we may be prevented from producing
Aldurazyme unless and until we obtain a license.
The United States Patent and Trademark Office recently issued a patent
which includes claims related to (alpha)-L-iduronidase. Our lead drug product,
Aldurazyme, may infringe on this patent. We believe that this patent is invalid
and intend to challenge it on a number of grounds. Our challenges may be
unsuccessful. Even if we are successful, challenging the patent may be
expensive, require our management to devote significant time to this effort and
may delay commercialization of our product in the United States.
The patent holder has granted an exclusive license for products relating to
this patent to one of our competitors. If we are unable to successfully
challenge the patent, we may be unable to produce Aldurazyme in the United
States unless we can obtain a sub-license from the current licensee. The current
licensee is not required to grant us a license and even if a license is
available, we may have to pay substantial license fees which could adversely
affect our business and operating results.
If our joint venture with Genzyme were terminated, we could be barred from
commercializing Aldurazyme or our ability to commercialize Aldurazyme would be
delayed or diminished.
We are relying on Genzyme to apply the expertise it has developed through
the launch and sale of Ceredase(R) and Cerezyme(R) enzymes for Gaucher disease,
a rare genetic disorder, to the marketing of our initial drug product,
Aldurazyme. Because it is our initial product, our operations are substantially
dependent upon the development of Aldurazyme. We have no experience selling,
marketing or obtaining reimbursement for pharmaceutical products. In addition,
without Genzyme we would be required to pursue foreign regulatory approvals. We
have no experience in seeking foreign regulatory approvals.
We cannot guarantee that Genzyme will devote the resources necessary to
successfully market Aldurazyme. In addition, either party may terminate the
joint venture for specified reasons, including if the other party is in material
breach of the agreement or has experienced a change of control or has declared
bankruptcy and also is in breach of the agreement. Either party may also
terminate the agreement upon one-year prior written notice for any reason.
Furthermore, we may terminate the joint venture if Genzyme fails to fulfill its
contractual obligation to pay us $12.1 million in cash upon the approval of the
BLA for Aldurazyme.
Upon termination of the joint venture one party must buy out the other
party's interest in the joint venture. The party who buys out the other will
then also obtain, exclusively, all rights to Aldurazyme and any related
intellectual property and regulatory approvals.
If the joint venture is terminated by Genzyme for a breach on our part,
Genzyme would be granted, exclusively, all of the rights to Aldurazyme and any
related intellectual property and regulatory approvals and would be obligated to
buy out our interest in the joint venture. We would then effectively be unable
to develop and commercialize Aldurazyme. If we terminated the joint venture for
a breach by Genzyme, we would be obligated to buy out Genzyme's interest in the
joint venture and, we would then be granted all of these rights to Aldurazyme
exclusively. While we could then continue to develop Aldurazyme, that
development would be slowed because we would have to divert substantial capital
to buy out Genzyme's interest in the joint venture. We would then either have to
search for a new partner to commercialize the product and to obtain foreign
regulatory approvals or have to develop these capabilities ourselves.
8
If the joint venture is terminated by us without cause, Genzyme would have
the option, exercisable for one year, to immediately buy out our interest in the
joint venture and obtain all rights to Aldurazyme exclusively. If the agreement
is terminated by Genzyme without cause, we would have the option, exercisable
for one year, to immediately buy out Genzyme's interest in the joint venture and
obtain these exclusive rights. In event of termination of the buy out option
without exercise by the non-terminating party as described above, all right and
title to Aldurazyme is to be sold to the highest bidder, with the proceeds to be
split equally between Genzyme and us.
If the joint venture is terminated by us because Genzyme fails to make the
$12.1 million payment to us upon FDA approval of the BLA for Aldurazyme, we
would be obligated to buy Genzyme's interest in the joint venture and would
obtain all rights to Aldurazyme exclusively. If the joint venture is terminated
by either party because the other declared bankruptcy and is also in breach of
the agreement, the terminating party would be obligated to buy out the other and
would obtain all rights to Aldurazyme exclusively. If the joint venture is
terminated by a party because the other party experienced a change of control,
the terminating party shall notify the other party, the offeree, of its intent
to buy out the offeree's interest in the joint venture for a stated amount set
by the terminating party at its discretion. The offeree must then either accept
this offer or agree to buy the terminating party's interest in the joint venture
on those same terms. The party who buys out the other would then have exclusive
rights to Aldurazyme.
If we were obligated, or given the option, to buy out Genzyme's interest in
the joint venture, and gain exclusive rights to Aldurazyme, we may not have
sufficient funds to do so and we may not be able to obtain the financing to do
so. If we fail to buy out Genzyme's interest we may be held in breach of the
agreement and may lose any claim to the rights to Aldurazyme and the related
intellectual property and regulatory approvals. We would then effectively be
prohibited from developing and commercializing the product.
Termination of the joint venture in which we retain the rights to
Aldurazyme could cause us significant delays in product launch in the United
States, difficulties in obtaining third-party reimbursement and delays or
failure to obtain foreign regulatory approval, any of which could hurt our
business and results of operations. Since Genzyme funds 50% of the joint
venture's operating expenses, the termination of the joint venture would double
our financial burden and reduce the funds available to us for other product
programs.
If we are unable to manufacture our drug products in sufficient quantities and
at acceptable cost, we may be unable to meet demand for our products and lose
potential revenues or have reduced margins.
As an organization, we have no experience manufacturing drug products in
volumes that will be necessary to support commercial sales. Our manufacturing
process may not meet initial expectations as to schedule, reproducibility,
yields, purity, costs, quality, and other measurements of performance.
Improvements in manufacturing processes typically are very difficult to achieve
and are often very expensive. We cannot know with certainty how long it might
take to make improvements if it became necessary to do so. If we contract for
manufacturing services with an unproven process, our contractor is subject to
the same uncertainties, high standards and regulatory controls.
If we are unable to establish and maintain commercial scale manufacturing within
our planned time and cost parameters, sales of our products and our financial
performance will be adversely affected.
We may encounter problems with any of the following if we attempt to
increase the scale or size of manufacturing:
o Design, construction and qualification of manufacturing facilities
that meet regulatory requirements
o Production yields
o Purity
o Quality control and assurance systems
o Shortages of qualified personnel
o Compliance with regulatory requirements
9
We have constructed and built-out a total of 41,200 square feet at our
Novato facilities for manufacturing capability for Aldurazyme and rhASB. We
expect to expand the Galli Drive facility in stages over time, which creates
additional operational complexity and challenges. We expect that the
manufacturing process of all of our new products, including rhASB, will require
lengthy significant time and resources before we can begin to manufacture them
(or have them manufactured by third parties) in commercial quantity. Even if we
can establish the necessary capacity, we cannot be certain that manufacturing
costs will be commercially reasonable, especially if third-party reimbursement
is substantially lower than expected.
In order to achieve our product cost targets we must develop efficient
manufacturing processes either by:
o Improving the product yield from our current cell lines, colonies of
cells which have a common genetic make-up,
o Improving the processes licensed from others, or
o Developing more efficient, lower cost recombinant cell lines and
production processes.
A recombinant cell line is a cell line with foreign DNA inserted which is
used to produce a protein that it would not have otherwise produced. The
development of a stable, high production cell line for any given enzyme is
risky, expensive and unpredictable and may not result in adequate yields. In
addition, the development of protein purification processes is difficult and may
not produce the high purity required with acceptable yield and costs or may not
result in adequate shelf-lives of the final products. If we are not able to
develop efficient manufacturing processes, the investment in manufacturing
capacity sufficient to satisfy market demand will be much greater and will place
heavy financial demands upon us. If we do not achieve our manufacturing cost
targets, we will have lower margins and reduced profitability in commercial
production and larger losses in manufacturing start-up phases.
If we are unable to increase our marketing and distribution capabilities or to
enter into agreements with third parties to do so, our ability to generate
revenues will be diminished.
If we cannot increase our marketing capabilities either by developing our
sales and marketing organization or by entering into agreements with others, we
may be unable to successfully sell our products. If we are unable to effectively
sell our drug products, our ability to generate revenues will be diminished.
To increase our distribution and marketing for both our drug candidates and
our Glyko, Inc. products, we will have to increase our current sales force
and/or enter into third-party marketing and distribution agreements. We cannot
guarantee that we will be able to hire in a timely manner, the qualified sales
and marketing personnel we need, if at all. Nor can we guarantee that we will be
able to enter into any marketing or distribution agreements on acceptable terms,
if at all. If we cannot increase our marketing capabilities as we intend, either
by increasing our sales force or entering into agreements with third parties,
sales of our products may be adversely affected.
Under our joint venture with Genzyme, Genzyme is responsible for marketing
and distributing Aldurazyme. We cannot guarantee that we will be able to
establish sales and distribution capabilities or that the joint venture, any
future collaborators or we will successfully sell any of our drug candidates.
If we fail to compete successfully, our revenues and operating results will be
adversely affected.
Our competitors may develop, manufacture and market products that are more
effective or less expensive than ours. They may also obtain regulatory approvals
for their products faster than we can obtain them, including those products with
orphan drug designation, or commercialize their products before we do. If our
competitors successfully commercialize a product, which treats a given rare
genetic disease before we do, we will effectively be precluded from developing a
product to treat that disease because the patient populations of the rare
genetic diseases are so small. If our competitor gets orphan drug exclusivity,
we could be precluded from marketing our version for seven years. However,
different drugs can be approved for the same condition. These companies also
compete with us to attract qualified personnel and organizations for
acquisitions, joint ventures or other collaborations. They also compete with us
to attract academic research institutions as partners and to license these
institutions' proprietary technology. If our competitors successfully enter into
partnering arrangements or license agreements with academic research
institutions, we will then be precluded from pursuing those specific
opportunities. Since each of these opportunities is unique, we may not be able
to find a substitute. Several pharmaceutical and biotechnology companies have
10
already established themselves in the field of enzyme therapeutics, including
Genzyme, our joint venture partner. These companies have already begun many drug
development programs, some of which may target diseases that we are also
targeting, and have already entered into partnering and licensing arrangements
with academic research institutions, reducing the pool of available
opportunities.
Universities and public and private research institutions are also
competitors. While these organizations primarily have educational or basic
research objectives, they may develop proprietary technology and acquire patents
that we may need for the development of our drug products. We will attempt to
license this proprietary technology, if available. These licenses may not be
available to us on acceptable terms, if at all. We also directly compete with a
number of these organizations to recruit personnel, especially scientists and
technicians.
We believe that established technologies provided by other companies, such
as laboratory and testing services firms, compete with Glyko, Inc.'s products
and services. For example, Glyko's FACE(R) Imaging System competes with
alternative carbohydrate analytical technologies, including capillary
electrophoresis, high-pressure liquid chromatography, mass spectrometry and
nuclear magnetic resonance spectrometry. These competitive technologies have
established customer bases and are more widely used and accepted by scientific
and technical personnel because they can be used for non-carbohydrate
applications. Companies competing with Glyko may have greater financial,
manufacturing and marketing resources and experience.
If we fail to manage our growth or fail to recruit and retain personnel, our
product development programs may be delayed.
Our rapid growth has strained our managerial, operational, financial and
other resources. We expect this growth to continue. We have entered into a joint
venture with Genzyme. If we receive FDA approval to market Aldurazyme, the joint
venture will be required to devote additional resources to support the
commercialization of Aldurazyme.
To manage expansion effectively, we need to continue to develop and improve
our research and development capabilities, manufacturing and quality capacities,
sales and marketing capabilities and financial and administrative systems. We
cannot guarantee that our staff, financial resources, systems, procedures or
controls will be adequate to support our operations or that our management will
be able to manage successfully future market opportunities or our relationships
with customers and other third parties.
Our future growth and success depend on our ability to recruit, retain,
manage and motivate our employees. The loss of key scientific, technical and
managerial personnel may delay or otherwise harm our product development
programs. Any harm to our research and development programs would harm our
business and prospects.
Because of the specialized scientific and managerial nature of our
business, we rely heavily on our ability to attract and retain qualified
scientific, technical and managerial personnel. In particular, the loss of
Fredric D. Price, our Chairman and Chief Executive Officer, or Christopher M.
Starr, Ph.D., our Vice President for Research and Development, could be
detrimental to us if we cannot recruit suitable replacements in a timely manner.
While Mr. Price and Dr. Starr are parties to employment agreements with us, we
cannot guarantee that they will remain employed with us in the future. In
addition, these agreements do not restrict their ability to compete with us
after their employment is terminated. The competition for qualified personnel in
the biopharmaceutical field is intense. We cannot be certain that we will
continue to attract and retain qualified personnel necessary for the development
of our business.
If product liability lawsuits are successfully brought against us, we may incur
substantial liabilities.
We are exposed to the potential product liability risks inherent in the
testing, manufacturing and marketing of human pharmaceuticals. The
BioMarin/Genzyme LLC maintains product liability insurance for our clinical
trials of Aldurazyme. We have obtained insurance against product liability
lawsuits for the clinical trials for rhASB. We may be subject to claims in
connection with our current clinical trials for Aldurazyme and rhASB for which
the joint venture's or our insurance coverages are not adequate. We cannot be
certain that if Aldurazyme receives FDA approval, the product liability
insurance the joint venture will need to obtain in connection with the
commercial sales of Aldurazyme will be available in meaningful amounts or at a
reasonable cost. In addition, we cannot be certain that we can successfully
defend any product liability lawsuit brought against us. If we are the subject
of a successful product liability claim which exceeds the limits of any
insurance coverage we may obtain, we may incur substantial liabilities which
would adversely affect our earnings and financial condition.
11
Our stock price may be volatile and an investment in our stock could suffer a
decline in value.
Our valuation and stock price since the beginning of trading after our
initial public offering have had no meaningful relationship to current or
historical earnings, asset values, book value or many other criteria based on
conventional measures of stock value. The market price of our common stock will
fluctuate due to factors including:
o Progress of Aldurazyme and our other lead drug products through the
regulatory process, especially Aldurazyme regulatory actions in the
United States
o Results of clinical trials, announcements of technological innovations
or new products by us or our competitors
o Government regulatory action affecting our drug candidates or our
competitors' drug candidates in both the United States and foreign
countries
o Developments or disputes concerning patent or proprietary rights
o General market conditions for emerging growth and biopharmaceutical
companies
o Economic conditions in the United States or abroad
o Actual or anticipated fluctuations in our operating results
o Broad market fluctuations in the United States or in Europe may cause
the market price of our common stock to fluctuate
o Changes in company assessments or financial estimates by securities
analysts
In addition, the value of our common stock may fluctuate because it is
listed on both the Nasdaq National Market and the Swiss Exchange's SWX New
Market. Listing on both exchanges may increase stock price volatility due to:
o Trading in different time zones
o Different ability to buy or sell our stock
o Different market conditions in different capital markets
o Different trading volume
In the past, following periods of large price declines in the public market
price of a company's securities, securities class action litigation has often
been initiated against that company. Litigation of this type could result in
substantial costs and diversion of management's attention and resources, which
would hurt our business. Any adverse determination in litigation could also
subject us to significant liabilities.
Substantial resales of the common stock which may be issued pursuant to this
prospectus could adversely affect the price of our common stock.
The maximum shares which may be issued pursuant to this prospectus
represents a significant portion of our outstanding common stock. If the persons
acquiring these shares sell all or a substantial portion of these shares on the
public market in a short period of time, the common stock available for sale may
exceed the demand and the stock price may be adversely affected. In addition,
the mere perception that such sales could occur may depress the price of our
common stock.
If our officers, directors and largest stockholder elect to act together, they
may be able to control our management and operations, acting in their best
interests and not necessarily those of other stockholders.
Our directors and officers control approximately 46% of the outstanding
shares of our common stock. Glyko Biomedical, Ltd. owns 31% of the outstanding
shares of our capital stock. The president and chief executive officer of Glyko
Biomedical and a significant shareholder of Glyko Biomedical serve as two of our
directors. As a result, due to their concentration of stock ownership, directors
12
and officers, if they act together, may be able to control our management and
operations, and may be able to prevail on all matters requiring a stockholder
vote including:
o The election of all directors;
o The amendment of charter documents or the approval of a merger, sale
of assets or other major corporate transactions; and
o The defeat of any non-negotiated takeover attempt that might otherwise
benefit the public stockholders.
Anti-takeover provisions in our charter documents and under Delaware law may
make an acquisition of us, which may be beneficial to our stockholders, more
difficult.
BioMarin is incorporated in Delaware. Certain anti-takeover provisions of
Delaware law and our charter documents as currently in effect may make a change
in control of our company more difficult, even if a change in control would be
beneficial to the stockholders. Our anti-takeover provisions include provisions
in the certificate of incorporation providing that stockholders' meetings may
only be called by the board of directors and a provision in the bylaws providing
that the stockholders may not take action by written consent. Additionally, our
board of directors has the authority to issue 1,000,000 shares of preferred
stock and to determine the terms of those shares of stock without any further
action by the stockholders. The rights of holders of our common stock are
subject to the rights of the holders of any preferred stock that may be issued.
The issuance of preferred stock could make it more difficult for a third party
to acquire a majority of our outstanding voting stock. Delaware law also
prohibits corporations from engaging in a business combination with any holders
of 15% or more of their capital stock until the holder has held the stock for
three years unless, among other possibilities, the board of directors approves
the transaction. Our board of directors may use these provisions to prevent
changes in the management and control of our company. Also, under applicable
Delaware law, our board of directors may adopt additional anti-takeover measures
in the future.
13
FORWARD LOOKING STATEMENTS
This prospectus contains forward looking statements. These statements
relate to future events or our future financial performance. We have identified
forward looking statements in this prospectus using words such as "anticipates",
"believes," "could," "estimates," "expects," "intends," "may," "plans,"
"potential," "predicts," "should," or "will" or the negative of such terms or
other comparable terminology. These statements are based on our beliefs as well
as assumptions we made using information currently available to us. Because
these statements reflect our current views concerning future events, these
statements involve risks, uncertainties, and assumptions. These risks,
uncertainties, assumptions and other factors, including the risks outlined under
"Risk Factors," that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from future
results, levels of actual activity, performance or achievements expressed or
implied by such forward looking statements.
Although we believe that the expectations reflected in the forward looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of such statements. We
are under no duty to update any of the forward looking statements after the date
of this prospectus to conform such statements to actual results, unless required
by law.
14
MATERIAL CHANGES TO OUR COMPANY
Effective November 1, 2000, Mr. Fredric D. Price was elected as a member of
our board of directors and appointed as our Chairman and Chief Executive
Officer. Immediately prior to such appointment, Mr. Grant W. Denison resigned as
Chairman and Chief Executive Officer. Mr. Denison continues to serve as one of
our directors.
From September 1994 until September 2000, Mr. Price was President, Chief
Executive Officer and a member of the board of directors of AMBI, Inc., a
biotechnology and nutrition company. From July 1991 to September 1994, Mr. Price
served as Vice President Finance and Administration and Chief Financial Officer
of Regeneron Pharmaceuticals, Inc., a biotechnology company. He is also
currently a member of the advisory board of Equity4Life AG, a healthcare
investment company based in Zurich, Switzerland. Mr. Price, 55, received his
B.A. from Dartmouth College and a M.B.A. from the Wharton School of the
University of Pennsylvania.
In connection with Mr. Price's employment, we entered into an employment
agreement with him which provides for an initial payment to Mr. Price of
$357,624, an annual base salary of $400,000 in the first year, $450,000 in the
second year, and $500,000 in the third year, and a bonus of $200,000 in the
first year and a performance bonus of between 25% and 100% of his respective
annual base salary for each of the second and third years. In addition, we
granted Mr. Price 25,000 restricted shares of our common stock (which vest in 3
equal annual installments commencing on January 1, 2001), we granted Mr. Price
an option to purchase 500,000 shares of our common stock, at a purchase price of
$12.50 per share (which vests monthly over 36 months, commencing October 30,
2000) and we further agreed to grant Mr. Price additional options on each
anniversary of the agreement, in an amount to be determined by the board. We
also agreed to reimburse Mr. Price for all expenses incurred in relocating to
the area and to extend him a $1,500,000 interest-deferred loan for the purchase
of a house.
The agreement has a three-year term which will automatically renew for an
additional three year period unless either Mr. Price or we give the other notice
of our intent not to renew the agreement. If we decide not to renew the
agreement, we must pay Mr. Price an amount such that our net payment after
deduction of all payroll taxes and all income taxes at the highest marginal
rates applicable to him will equal the base salary and bonus we paid him in the
third year of the agreement. Additionally, the exercise for any vested options
will be one year from the termination of the agreement and all unvested options
will remain unvested and unexercisable.
Either party can terminate the agreement on sixty days' notice. However, in
the event there is a change in control which results in Mr. Price's actual or
constructive termination, he is entitled to a severance payment equal to twice
the aggregate of his annual base salary and bonus payable in the year in which
termination occurs, forgiveness of all outstanding principal and interest on the
interest-deferred loan, acceleration of the full unvested portion of his 25,000
share stock grant and all stock options and an additional payment equal to Mr.
Price's maximum total income tax liability applicable to the total severance
package. If Mr. Price is terminated other than for cause, he is entitled to
receive a severance payment equal to twice his applicable annual base salary and
bonus if he is terminated in the first year of the agreement and equal to his
applicable annual base salary and bonus of he is terminated in a subsequent
year, forgiveness of all outstanding principal and interest on the interest
deferred-loan and acceleration of the full unvested portion of his 25,000 share
stock grant. Additionally, if he is terminated other than for cause prior to the
second anniversary of the agreement, he is entitled to an additional payment
equal the maximum income tax liability associated with forgiveness of the loan
and such additional payment.
15
USE OF PROCEEDS
We cannot guarantee that we will receive any proceeds in connection with
this offering. We will receive the proceeds from any sale of the shares to Acqua
Wellington as described in the Plan of Distribution but we will receive no
proceeds from any subsequent sale of the shares by Acqua Wellington.
We intend to use any proceeds of this offering, together with other
available funds, for the following purposes:
o To fund our share of costs associated with our joint venture with
Genzyme for the development and commercialization of Aldurazyme;
o To fund research and development including clinical trials, regulatory
processes, process development and scale-up and start-up of
manufacturing activities for our other pharmaceutical product
programs, including rhASB and Vibriolysin;
o To fund research, development, clinical and commercial manufacturing
facilities, including related equipment; and
o To fund general corporate purposes, including working capital.
A portion of the proceeds may also be used to acquire or invest in
complementary businesses or products or to obtain rights to use complementary
technologies.
We may require additional funds in the 12-month period following this
offering to accelerate product programs or to undertake new initiatives or enter
into collaborative arrangements.
We have not identified precisely the amounts we plan to spend on each of
these areas or the timing of such expenditures. Accordingly, our management will
have significant flexibility in applying such proceeds. The amounts actually
expended for each purpose may vary significantly depending upon numerous
factors, including the amount and timing of the proceeds from this offering,
progress with the regulatory approval, manufacturing and commercialization of
Aldurazyme and rhASB and progress with our other development programs. In
addition, expenditures will also depend upon the establishment of additional
collaborative arrangements with other companies, the availability of other
financing and other factors. Pending use for these or other purposes, we intend
to invest the net proceeds of this offering in short-term, investment-grade,
interest-bearing securities.
We anticipate that we will be required to raise substantial additional
capital to continue to accelerate product programs or to undertake new
initiatives or enter into collaborative arrangements. Additional capital may be
raised through additional public or private financing, as well as collaborative
relationships, borrowings and other available sources. See "Risk Factors - if we
fail to obtain the capital necessary to fund our operations we will be unable to
complete our product development programs."
16
PLAN OF DISTRIBUTION
On January 26, 2001, we entered into a common stock purchase agreement with
Acqua Wellington North American Equities Fund, Ltd. pursuant to which, subject
to the satisfaction of certain conditions, we may issue and sell and Acqua
Wellington will be obligated to purchase, from time to time over the next 20
months, up to an aggregate of $50,000,000 of our common stock.
At our discretion, we may present Acqua Wellington with draw down notices
from time to time, provided that there must be at least five trading days
between the end of each pricing period and the next draw down, requiring that
Acqua Wellington purchase shares of our common stock. For each draw down, we
will determine the minimum sale price per share and the total dollar amount of
each draw down, subject to a limit of between $500,000 and $4,000,000 determined
by the minimum sale price of the draw down. Over a 20 trading day period, for
each trading day the volume weighted average price for our common stock exceeds
the minimum purchase price, Acqua Wellington will be obligated to purchase a pro
rata portion of the total draw down amount at a price per share equal to the
volume weighted average price of our common stock less a discount of between 4%
to 6%.
Additionally, at our discretion, in connection with each any down we may
issue Acqua Wellington call options of up to the amount of the draw down. The
call options give Acqua Wellington the right, but not the obligation, to
purchase an additional amount of our common stock concurrent with the draw down.
Acqua Wellington may exercise all or any unexercised portion of these options at
any time during the pricing period of the draw down and for a purchase price
equal to the volume weighted average price of our common stock on the day of
exercise less a discount of 4% to 6%.
All of the shares purchased under a draw down and upon the exercise of any
related call options will be settled on the second trading day after the end of
the related pricing period. Prior to each settlement, we will file a prospectus
supplement that describes the number of shares being purchased and the price per
share. The aggregate amount of common stock that Acqua Wellington will be
required to purchase from us will not exceed an aggregate of $50,000,000.
Additionally, Acqua Wellington will have no obligation to purchase our common
stock if the volume weighted average trading price of our common stock is below
$7.00 per share.
If on the ten month anniversary of the stock purchase agreement, we have
not requested draw downs and granted call options in an aggregate amount of
$4,500,000 we will be required to either pay Acqua Wellington a fee of not more
than $300,000 or to issue to Acqua Wellington warrants to purchase not more than
300,000 shares of our common stock, at Acqua Wellington's discretion.
Pursuant to the purchase agreement, Acqua Wellington may resell shares of
our common stock at any time, in such manner and at such prices as it may
determine. These sales of common stock may occur from time to time in
transactions on the Nasdaq National Market (or any exchange where the common
stock is then listed), in negotiated transactions, or otherwise, or by a
combination of these methods, at fixed prices which may be changed, at market
prices at the time of sale, at prices related to market prices or at negotiated
prices. Acqua Wellington may effect these transactions by selling the common
stock to or through broker-dealers, who may receive compensation in the form of
discounts, concessions or commissions from Acqua Wellington or the purchasers of
the common stock for whom the broker-dealer may act as an agent or to whom it
may sell the common stock as a principal, or both. The compensation to a
particular broker-dealer may be in excess of customary commissions. Neither we
nor Acqua Wellington can presently estimate the amount of such compensation.
Broker-dealers may agree with Acqua Wellington to sell a specified number
of shares of our common stock at a stipulated price per share, and, to the
extent such a broker-dealer is unable to do so acting as agent for Acqua
Wellington, to purchase as principal any unsold common stock at the price
required to fulfill the broker-dealer commitment to Acqua Wellington.
Broker-dealers who acquire common stock as principal may thereafter resell the
common stock from time to time in transactions (which may involve crosses and
block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market, in negotiated transactions or otherwise, at market
prices prevailing at the time of sale or at negotiated prices, and in connection
with such resales may pay to or receive from the purchasers of such common stock
commissions computed as described above.
Acqua Wellington may be deemed an "underwriter" within the meaning of the
Securities Act in connection with the sale of the common stock offered hereby.
Broker-dealers who act in connection with the sale of the common stock may also
be deemed to be underwriters. Profits on any resale of the common stock as a
principal by such broker-dealers and any commissions received by such
17
broker-dealers may be deemed to be underwriting discounts and commissions under
the Securities Act. Any broker-dealer participating in such transactions as
agent may receive commissions from Acqua Wellington (and, if they act as agent
for the purchaser of our common stock, from such purchaser).
The common stock offered hereby is being registered pursuant to our
contractual obligations with Acqua Wellington, and we have agreed to pay the
costs of registering the shares hereunder. We have also agreed to reimburse
Acqua Wellington's costs and expenses incurred in connection with the stock
purchase agreement, including fees, expenses and disbursements of counsel for
Acqua Wellington for the preparation of the stock purchase agreement up to a
maximum of $50,000, and all reasonable fees incurred in connection with any
amendment, modification or waiver, to or enforcement of the stock purchase
agreement.
In the stock purchase agreement with Acqua Wellington, we have agreed to
indemnify and hold harmless Acqua Wellington and each person who controls Acqua
Wellington, against certain liabilities, including liabilities under the
Securities Act, which may be based upon, among other things, any untrue
statement or alleged untrue statement of a material fact or any omission or
alleged omission of a material fact contained in any prospectus or any
prospectus supplement, unless made or omitted in reliance upon written
information provided to us by Acqua Wellington.
LEGAL MATTERS
For the purpose of this offering, Paul, Hastings, Janofsky & Walker LLP,
Los Angeles, California is giving an opinion of the validity of the issuance of
the securities offered in this prospectus.
EXPERTS
The financial statements included in our Annual report on form 10-K for the
year ended December 31, 1999, incorporated by reference in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their report(s) with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
18
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Securities and Exchange Commission registration fee.............. $ 14,457
Legal fees and expenses.......................................... 35,000
Accountants' fees and expenses................................... 5,000
Miscellaneous.................................................... 3,000
--------
Total............................................................ $ 57,457
The foregoing items, except for the Securities and Exchange Commission
registration fee, are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Reference is made to the Amended and Restated Certificate of Incorporation
with the Registrant; the Bylaws of the Registrant; Section 145 of the Delaware
General Corporation Law; which, among other things, and subject to certain
conditions, authorize the Registrant to indemnify, or indemnify by their terms,
as the case may be, the directors and officers of the Registrant against certain
liabilities and expenses incurred by such persons in connection with claims made
by reason of their being such a director or officer. Pursuant to this authority,
the Registrant has entered into an indemnification agreement with each director
and executive officer, whereby the Registrant has agreed to cover the
indemnification obligations.
The Registrant maintains director's and officer's insurance providing
indemnification against certain liabilities for certain of the Registrant's
directors, officers, affiliates, partners or employees.
The indemnification provisions in the Registrant's Bylaws, and the
indemnification agreements entered into between the Registrant and its directors
and executive officers, may be sufficiently broad to permit indemnification of
the Registrant's officers and directors for liabilities arising under the Act.
Reference is made to the following documents incorporated by reference into
this Registration Statement regarding relevant indemnification provisions
described above and elsewhere herein: (1) the Amended and Restated Certificate
of Incorporation, filed as Exhibit 3.1B to Registrant's Amendment No. 2 to
Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on July 6, 1999; (2) the Bylaws of the Registrant filed as Exhibit
3.2 to Registrant's Registration Statement on Form S-1 filed with the Securities
and Exchange Commission on May 4, 1999 and (3) the form of Indemnification
Agreement entered into by the Registrant with each of its directors and
executive officers filed as Exhibit 10.1 to Registrant's Registration Statement
on Form S-1 filed with the Securities and Exchange Commission on May 4, 1999,
each incorporated by reference into this Registration Statement.
II-1
ITEM 16. EXHIBITS
EXHIBIT NO. DESCRIPTION OF DOCUMENT
-------------------- -----------------------------------------------------------
5.1 Opinion of Paul, Hastings, Janofsky & Walker, LLP
10.1 Employment Agreement with Fredric D. Price dated December
22, 2000
10.2* Common Stock Purchase Agreement between BioMarin
Pharmaceutical Inc. and Acqua Wellington North American
Equities Fund, Ltd., dated January 26, 2001
23.1 Consent of Paul, Hastings, Janofsky & Walker LLP.
(consent included in Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP
24.1 Power of Attorney
* Filed herewith. All other Exhibits filed previously
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the provisions described in Item 15 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made pursuant to this registration statement: (i) to
include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the prospectus any
facts or events arising after the effective date of the
registration statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected
in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration
statement; (iii) to include any material information with
respect to the distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
II-2
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant undertakes that: (1) for purpose of determining
any liability under the Securities Act of 1933, the information omitted from the
form of prospectus filed as part of the registration statement in reliance upon
Rule 430A and contained in the form of prospectus filed by the Registrant
pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of the registration statement as of the time it was declared
effective; and (2) for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Novato, State of California, this 26th day of January,
2001.
BIOMARIN PHARMACEUTICAL INC.
By: /s/ Fredric D. Price
----------------------------------------------
Fredric D. Price
Chairman, Chief Executive Officer and Director
(Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-3 has been signed by the following persons in
the capacities and on the dates indicated:
Signature Title Date
/s/ Fredric D. Price Chairman, Chief Executive Officer January 26, 2001
------------------------ and Director (Principal
Fredric D. Price Executive Officer)
/s/ Raymond W. Anderson Chief Financial Officer, Chief January 26, 2001
------------------------ Operating Officer, Secretary, and
Raymond W. Anderson Vice President Finance and
Administration (Principal Financial
and Accounting Officer)
/s/ * Director January 26, 2001
------------------------
Grant W. Denison, Jr.
/s/ * Director January 26, 2001
------------------------
Ansbert S. Gadicke, M.D.
/s/ * Director January 26, 2001
------------------------
Erich Sager
/s/ * Director January 26, 2001
------------------------
Gwynn R. Williams
*By: /s/ Raymond W. Anderson
---------------------------
Raymond W. Anderson
as Attorney-In-Fact
II-4
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF DOCUMENT
------------------ ------------------------------------------------------------
5.1 Opinion of Paul, Hastings, Janofsky & Walker, LLP
10.1 Employment Agreement with Fredric D. Price dated December
22, 2000
10.2* Common Stock Purchase Agreement between BioMarin
Pharmaceutical Inc. and Acqua Wellington North American
Equities Fund, Ltd., dated January 26, 2001
23.1 Consent of Paul, Hastings, Janofsky & Walker LLP.
(consent included in Exhibit 5.1)
23.2 Consent of Arthur Andersen LLP
24.1 Power of Attorney
* Filed herewith. All other Exhibits filed previously